What is EBIT?
EBIT (Earnings Before Interest and Taxes) measures your company's profitability from operations alone. It strips out financing decisions (interest) and tax situations, letting you see how well the actual business performs.
Why EBIT Matters for Founders
EBIT isolates operational performance from capital structure. Two identical SaaS companies might have different net incomes simply because one took on debt. EBIT lets investors compare them apples-to-apples.
For ecommerce founders, EBIT reveals whether your merchandising, fulfillment, and customer acquisition actually generate profit before the accountants and bankers take their cut.
EBIT vs EBITDA
EBIT includes depreciation and amortization costs. EBITDA excludes them. For asset-light SaaS businesses, the difference is usually small. For ecommerce companies with warehouses and equipment, the gap can be significant. Project your EBIT across multiple scenarios with our pro forma income statement generator.
Formula
EBIT = Revenue - COGS - Operating Expenses
Or: EBIT = Net Income + Interest Expense + Taxes
Example
Your SaaS company has:
- Revenue: $2,000,000
- COGS (hosting, support): $400,000
- Operating Expenses (salaries, marketing, rent): $1,200,000
EBIT = $2,000,000 - $400,000 - $1,200,000 = $400,000
Your core business generates $400K in operating profit before interest and taxes.